In today’s briefing:
- Guotai Junan/Haitong Sec Merger: The Many Index Flows Around the Corner
- China National Building Material (3323 HK): H Share Buyback Vote on 19 February
- Merger Arb Mondays (27 Jan) – Fosun Tourism, Get Nice, Lifestyle China, Canvest, Japfa, SLB
- CNBM (3323 HK): This Is An “Avoid” Ahead Of 19th Feb H-Class Shareholder Vote
- Singamas (716 HK): Further Positive Indications from CIMC Profit Alert
- China National Building Material (3323 HK): Publication of Buyback Offer Document
- ECM Weekly (27th Jan 2025) – CATL, HDB Financial, Dr Agarwal’s, Eco-Shop, Vikran, Sanil, Timee
- Sinopharm Group Co Ltd (1099.HK) – Performance May Continue to Miss Expectations
Guotai Junan/Haitong Sec Merger: The Many Index Flows Around the Corner
- Haitong Securities (H) (6837 HK) and Haitong Securities (A) (600837 CH) shares will stop trading after 5 February following the merger with Guotai Junan Securities (2611 HK).
- There will be small buying in Guotai Junan Securities (2611 HK) at the close on 5 February and there should be more buying in the A-shares and H-shares in March.
- There will also be a stock added to the Shanghai Shenzhen CSI 300 Index (SHSZ300 INDEX) to bring the number of index constituents back to 300.
China National Building Material (3323 HK): H Share Buyback Vote on 19 February
- The IFA opines that the China National Building Material (3323 HK) share buyback, which will acquire a maximum of 841.7 million H Shares at HK$4.03, is fair and reasonable.
- The share buyback seems designed to enable the CNBM parent company to bypass the creeper rule and squeeze the shorts.
- The fortuitous material derating of peers has helped make the buyback attractive. Therefore, the votes should pass, and the minimum acceptance condition should be met.
Merger Arb Mondays (27 Jan) – Fosun Tourism, Get Nice, Lifestyle China, Canvest, Japfa, SLB
- We summarise the latest spreads and newsflow of merger arb situations we cover across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Philippines, Thailand and Chinese ADRs.
- Highest spreads: SLB Development (SLB SP), Japfa Ltd (JAP SP), Seven & I Holdings (3382 JP), Lifestyle China (2136 HK), Get Nice Financial Group Ltd (1469 HK).
- Lowest spreads: Makino Milling Machine Co (6135 JP), Avjennings Ltd (AVJ AU), Fuji Soft Inc (9749 JP), Auswide Bank (ABA AU), Pressance Corp (3254 JP).
CNBM (3323 HK): This Is An “Avoid” Ahead Of 19th Feb H-Class Shareholder Vote
- On the 6th December, China National Building Material (3323 HK) (CNBM), a leading PRC building materials company, offered to buy back 841,749,304 H-shares at HK$4.03/share, a 15.1% premium to undisturbed.
- The thrust of the buyback lifts the stake of CNBM’s parent – the CNBM Parent Concert Group – to 50.01% of total shares from 45.02% currently, necessitating a whitewash waiver.
- Pre-Cons were satisfied on the 24th Jan. The independent H-class shareholders vote for the waiver is on the 19th Feb. Minimum pro-ration is 19.24%. Implied back-end price is well down.
Singamas (716 HK): Further Positive Indications from CIMC Profit Alert
- China International Marine Cntnrs Gp (2039 HK)‘s positive profit alert suggested a very solid performance for Singamas Container Holdings (716 HK) in 4Q24.
- Annualising Singamas’ 1H24 earnings for the full year will mean a 78% profit surge in 2H24, but this is still conservative – CIMC’s 2H24 profit leaped 93x YoY.
- Trading on 6x PER, versus CIMC’s 10.3x, the stock is cheap. Net cash equals 86% of market capitalisation, potentially providing a yield higher than the 8.8% currently projected.
China National Building Material (3323 HK): Publication of Buyback Offer Document
- China National Building Material (3323 HK) published the H-share offer document and if everything is smooth, the payment will be made on 14 Mar 2025.
- Its two subsidiaries forecast poor profit/losses for FY24, suggesting a tough operating environment. The buyback valuation remains attractive relative to peer multiples.
- For non-holders, at the current price of HK$3.59, we do not think the safety margin is good enough, assuming that most existing shareholders will accept and tender.
ECM Weekly (27th Jan 2025) – CATL, HDB Financial, Dr Agarwal’s, Eco-Shop, Vikran, Sanil, Timee
- Aequitas Research’s weekly update on the IPOs, placements, lockup expiry and other ECM linked events that were covered by the team over the past week.
- On the IPO front, we had a look at the possible A/H listing for Contemporary Amperex Technology (CATL) (300750 CH), along with a few large IPOs in India .
- On the placements front, while there weren’t any large deals launched, we did look at the lockup expiry for Timee Inc (215A JP) and Sanil Electric (062040 KS).
Sinopharm Group Co Ltd (1099.HK) – Performance May Continue to Miss Expectations
- Due to disappointing performance in 24Q1-Q3, both revenue and net profit attributable to the parent company in 2024 could face negative growth, but 2025 is expected to have positive growth.
- As pharmaceutical distribution business can just maintain stable but medical device distribution business and retail pharmacies cannot contribute high growth, the overall performance of Sinopharm has lost growth momentum.
- Due to longer payment cycles from hospitals and its business characteristics, Sinopharm is facing significant demands for working capital. Insufficient cash flow makes it difficult to increase the dividend rate.
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